The news so far this year has understandably been dictated by the Covid-19 global pandemic. So much so that you may have forgotten about Brexit, which has dominated current affairs and split public opinion since the 2016 referendum.

On 31 January 2020, the UK officially left the European Union and Boris Johnson has committed to agreeing the terms of the UK’s new trading relationship with the EU bloc by the end of the year. Talks are currently stalling raising the possibility of a no deal Brexit.

Record Recession

Even without considering the implications of a no deal Brexit, the UK economy could shrink by 14% this year, according to the Bank of England. The dire mood was reflected last week when the UK Government sold its first bond ever with a negative yield, meaning that investors were effectively paying the Government to lend it money. Bonds or gilts, as they are known, are considered a safe haven when investors are worried that economic growth will remain depressed over a sustained period of time.

The UK Government currently projects that it will need to borrow £298 billion up to March 2021, to see it through the coronavirus crisis and the Governor of the Bank of England even indicated last week that interest rates could go negative in 2021, for the first time in history, should the economy need further stimulus at that time.

The clock is ticking

The deadline for agreeing a trade deal with the EU is 31 December 2020 and the Government has until 30 June 2020 to ask for an extension to that deadline; Boris Johnson has consistently said he will not do so.

Failure to reach an agreement could expose UK companies to new tariffs which may have an adverse effect on supply chains and make their products/services more expensive, just at the time when the country hopes to be recovering from the impact of Covid-19.

An additional problem for the economy is that Britons may continue to save their money, due to job insecurity or the threat of a second wave of coronavirus infections. Should this happen it will limit the impact of the Government relief efforts and the uncertainty of Brexit will only compound this.

If your company is experiencing financial problems, as a result of Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

Please call us now on 0330 159 8080 for a FREE confidential initial consultation.

Ready to re-start the Economy? – Most UK firms could re-open their doors within three weeks – Covid-19

Earlier this month Boris Johnson actively encouraged a return to work for those who cannot work from home and with another review due on 28 May it is likely he will loosen lockdown further in June.

According to a survey carried out by the British Chamber of Commerce earlier this month 89% of respondents said that they will require three weeks or less to prepare to restart operations – the majority of which are small to medium enterprises (SMEs).

Just over two-thirds of business-to-business service firms said that they would need less than one week to restart, compared to 50 per cent of business-to-consumer service firms, where social distancing is seen as a bigger issue to control.

Job Retention Scheme

Approximately 74 per cent of respondents have furloughed a portion of their staff; the job retention scheme has recently been extended to 31 October and remains vital in supporting businesses to preserve jobs and livelihoods.

Bounce Back Loan Scheme

Over a third of those interviewed for this survey said they had/were thinking of applying for a Bounce Back Loan. Almost a fifth were, however, concerned as to their ability to repay the loan.

The Bounce Back Loan Scheme provides loans of between £2,000 and £50,000 to SMEs effected by the impact of Covid-19. The scheme is 100 per cent government backed and does not require a personal guarantee from the company directors.

Whilst businesses may soon be ready to re-open their doors, they will require clear guidance with sufficient public transport and the re-opening of schools playing a key role. It will also be critical for the Government to maintain and evolve the financial support currently provided to give businesses the best possible opportunity to navigate their way through this crisis and avoid insolvency.

If your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

Please call us now on 0330 159 8080 for a FREE confidential initial consultation.

It cannot be argued that, as a result of Covid-19, life today is unrecognisable from the one we were living only a few months ago. As individuals we have seen unprecedented restrictions on our civil liberties and in business the landscape has changed dramatically, some say forever. So what will be “the New Normal’ and what options are there for the recovery of businesses affected by lock down?

Speaking yesterday, Prime Minister Boris Johnson announced a return to work for those in construction, manufacturing and any other job that cannot be done from home; a positive move for the economy but not without challenges. Measures to ensure social distancing must be taken and actively enforced with workstations, social areas and rest rooms all needing to be compliant. Directors who ignore this may find themselves subject to personal and potentially criminal liability and with a vaccine still many months away, these measures are likely to become second nature and normal.

But where else may the problems lie?

The Coronavirus Act 2020 protects commercial tenants from eviction for non-payment of rent until 30 June at the earliest and whilst this may be updated it does not mean that rent does not continue to accrue and existing arrears remain due. Landlords will no doubt be supportive where they can but as a commercial entity they will want to be paid and have a range of options in the event of non-payment. It is important to maintain dialogue with your landlord who will be more likely to work with those tenants who engage. If a rent deposit has been made, this may help to deal with any arrears and potentially an extension of the existing lease, providing a longer income stream for the landlord may help viable business to deal with the problem.

Similarly, those businesses who have chosen to defer payment of taxes may experience significant problems as lockdown is eased and HMRC begin to require payment. Time to Pay arrangements can be a good way of formalising a repayment plan with HMRC and as always, the key is to maintain dialogue and often a professional advisor is best placed to deal with any negotiations.

So as we move slowly towards a greater easing of lockdown, with the hospitality trade facing reduced capacity for the foreseeable future, high street retailers facing difficulties with social distancing whilst ensuring their staff are adequately protected, deferred debts becoming payable and Government support being phased out it is inevitable that many good businesses will experience severe cash flow pressures that will threaten their survival.

Range of support for UK businesses

There is a range of support available for businesses with good trading history and strong order books going forward and for whom relief from immediate cash pressure can mean survival. Company Voluntary Arrangements or CVA’s have been in existence since the Insolvency Act 1986 and whilst traditionally misapplication of this procedure has meant that they have a poor track record for success, as we emerge from the pandemic, this may represent the most appropriate support measure for many good businesses.

A CVA is, in essence, a legally binding deal between a Company and its creditors. If successful it binds all creditors and allows a Company to deal with its debts in a controlled a realistic way. Creditors are engaged in the process and will be entitled to vote to approve, amend or reject the proposed deal. Crucially, directors retain control of their business with an independent Supervisor appointed only to ensure that the terms of the deal are complied with. Typically a CVA will last for 5 years with the Company making regular contributions in settlement of all, or an agreed percentage of its debt. At the successful conclusion of the CVA, the Company is free of all historic debt even if it has not repaid in full under the agreement.

Alternative Solutions

An alternative to CVA is prepack liquidation which is a process where the sale of the business and assets is negotiated prior to the company entering liquidation and works in a similar way to prepack administration.

Often the existing owners of a company are best placed to purchase the business from a liquidator to ensure realisations for the benefit of creditors. The liquidator will rely upon an independent valuation of the business and will complete a sale once appointed. The owners of the new business are then able to continue to trade the new company debt free.

Prepack liquidation is best suited to small to medium sized enterprises (SME’s) as it is a less expensive, and if done correctly still allows the usual protections, whilst also avoiding the cost of a TUPE transfer.

If your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

In light of the Covid-19 pandemic, and the national lockdown imposed by the Government, many companies are facing financial hardship and may not be able to generate adequate future revenues to honour their existing debt obligations.

Inability to repay debts, as and when they fall due, can trigger insolvency proceedings which could lead to the premature liquidation of an otherwise viable business.

There are essentially two types of pre-packaged insolvency process which enable viable businesses to survive insolvency, namely administration and liquidation; both procedures ensure a sale can be done quickly thus reducing the likelihood of losing key employees and contracts and preserving the value of the business.

Pre-pack administration

Pre-pack administration is where a company agrees a sale of all or part of its business and assets before appointing administrators to conclude the sale.

The business and assets are usually sold to a third party but can alternatively be sold to the existing directors, operating under a new company, providing they have funding in place to acquire them at fair value.

It is most suited to larger companies since it is a costly procedure and complex compared to liquidation. Pre-pack administration works best where there is a fundamentally good business that cannot continue in its current form due to, for example, the threat of a winding up petition by a company creditor – but someone (either a third party or the existing directors) is prepared to fund ongoing trade via a new company.

Pre-Pack Liquidation

Pre-pack liquidation is an informal term used to describe a process where the sale of the business and assets is negotiated prior to the company entering liquidation and works in a similar way to pre-pack administration.

Often the existing owners of a company are best placed to purchase the business from a liquidator to ensure realisations for the benefit of creditors. The liquidator will rely upon an independent valuation of the business and will complete a sale once appointed. The owners of the new business are then able to continue to trade the new company debt free.

Prepack liquidation is best suited to small to medium sized enterprises (SME’s) as it is a less expensive, and if done correctly still allows the usual protections, whilst also avoiding the cost of a TUPE transfer.

If your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

During these unprecedented times of uncertainty surrounding businesses, it is now more important than ever that you continue dialogue with your existing suppliers and stakeholders. The Covid-19 pandemic is not a valid excuse to simply ignore creditors and suspend payments.

If your suppliers are not being paid, they are likely to run into cashflow difficulties which may ultimately threaten the viability of their own business. In these circumstances a more aggressive debt collection policy may be pursued and may ultimately, if your debt is more than £750, result in a winding up petition being issued.

Outset of the pandemic

At the outset of the pandemic the High Court were adjourning all winding up petitions. However, they are now being dealt with remotely where possible, although hearing dates are often many months down the line.

Notwithstanding the actual hearing being some time in the future, the petition itself will be advertised leading to significant disruption for your business, such as your bank account being frozen and possibly your customers not paying their outstanding invoices.

Payments to a creditor

Another problem area is post-petition dispositions i.e. where you make payments to a creditor between the date of petition and the date of the winding up, if in fact the order is made. Such payments are usually void unless a validation order is made by the Court. However, Covid-19 will undoubtedly be a factor for the Court when considering such orders and there may well be good grounds for the debtor company claiming that payments were made in order to ensure continuity of trading during the pandemic.

In order to avoid these complications, you should maintain an open dialogue with your suppliers; it is worth discussing extending credit terms or entering into a payment plan, if required. This will enable your suppliers to manage and plan for their business too.

Existing finance or loans

If you have existing asset finance or loans, consider extending the terms, to reduce monthly payments, or ask for a repayment holiday. Most lenders will consider a repayment holiday in the current climate.

Not adhering to payment terms or agreeing an alternative arrangement can result in the issue of a statutory demand for payment which, if missed or not dealt with in a timely manner, as a result of Covid-19 can leave your business exposed to the risk of being issued with a winding up petition.

Keep in constant dialogue with your creditors

To summarise, our advice is to keep in constant dialogue with your creditors which should ensure your business avoids being issued with a statutory demand and ultimately a winding petition.

If you wish to discuss this matter further or your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

Boris Johnson confirmed on Monday that the current lockdown will remain in place and that social distancing will stay with us for the foreseeable future. With this in mind, what will the ‘new normal’ look like and which sectors may be hardest hit by the Coronavirus/Covid-19 pandemic?

Restaurants / pubs

Restaurants and Pubs have traditionally played an important part in how British people socialise and lockdown has had a profound effect on this. These establishments have been forced to close with no sign as to when they may be allowed to reopen whereas Off-licenses are on the list of businesses considered essential to keep the nation running.

Notwithstanding the pub closures, alcohol has seen one of the largest increases in demand since lockdown with sales rising by 31.4% in March alone. Closures were not in full effect until midway through the month!

Hand in hand with this is the incredible rise to prominence of video conferencing sites such as Zoom and HouseParty. Zoom has reportedly seen daily downloads rise from 56000 in January 2020 to 2.13million in March. It would seem that people are finding new ways to socialise with online quizzes and ‘virtual pubs’ becoming the new way to stay in touch.

So what will happen when the government do finally allow pubs and restaurants to reopen? Will people revert to the traditional or will virtual meetings offer a cheaper and easier alternative in the post pandemic world?

Hairdressers and Beauty Salons

Hairdressers and Beauty Salons offer a service that relies upon close personal contact which directly conflicts with social distancing measures and were subject to closures under lockdown.

Unable to get a professional haircut, the ‘Buzz cut’ has surged back into fashion amongst many men and many women have settled for home colouring solutions as well as many other do-it-yourself beauty treatments.

It is likely that many shops will be allowed to open again soon, maybe even in the next few weeks, but those that require hands on contact with customers such as hair and beauty salons are the highest risk and it could easily be six months or more before such establishments are allowed to re-open.

This could be disastrous for the 41,000 or so such businesses in the UK and may see many face the serious threat of insolvency, especially as 60 per cent of hairdressers are freelance, so are not eligible for the furlough scheme.

Gyms

At the outset of the coronavirus pandemic in the UK, gyms and leisure centres were among the first businesses ordered to close. Experts advised the government that gyms are a potential breeding ground for the virus to spread and closing them was one of the key ways to stop the spread of the virus.

Most businesses in this sector have advised their members that they won’t pay while their gym is forced to keep its doors closed but with no income many fitness centres are struggling and are already laying off staff and, in some cases, closing down permanently.

This is further compounded by people purchasing their own personal items of gym equipment to keep fit with many retail sites such as Amazon and eBay reporting a surge in sales. Additionally, there has been a flood of online exercise classes with Joe Wicks to the fore and even the return of Mr Motivator!

Gym owners will be concerned that people, having made this investment in equipment and gotten used to the ‘home workout’ may decide that they don’t need to maintain their membership subscriptions favouring the new normal of their home exercise regimes.

It is unfortunately, therefore, inevitable that there will be many casualties in this particular sector.

If your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

Please call us now on 0330 159 8080 for a FREE confidential initial consultation.

These are unprecedented times with many businesses being forced to suspend trading and shut their doors as we wait out the viral pandemic.

The Government has introduced a number of measures to assist businesses through these times, but the inevitable flood of applications has led to many experiencing significant delays before funds arrive.

Faced with this there are several practical steps that you should be taking to protect your business and assist with cash flow.

Robust credit control

Chase debts as soon as they become due; if a customer is experiencing cash flow issues themselves, in view of the current pandemic, it may be sensible to allow a payment plan but if you do it needs be monitored carefully to ensure the terms are adhere to. You may also consider offering a small discount for early settlement.

Invoice discounting could also be considered to free up much needed cash.

Contact suppliers/stakeholders

Continue dialogue with existing customers; consider discussing extending credit terms or a payment plan, if required. If you have existing asset finance or loans, consider extending the terms, to reduce monthly payments, or ask for a repayment holiday. Most lenders will consider a repayment holiday in the current climate.

Taking on additional debt

If you need to borrow further monies it is always best to avoid PGs where possible. Although there are a number of lenders who can provide funds quickly, which may be tempting in such testing times, they will almost always insist on PGs and most will pursue you aggressively in the event of default on repayment of the debt.

In most cases, the Government support outlined above will be preferable if you are eligible and can get it. If you haven’t already, your next step is to talk to your professional advisors and access the suite of measures already put in place. These include:

A 12-month business rates holiday for retail, hospitality, leisure and nursery businesses in England.

Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief.

Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000

The HMRC Time To Pay Scheme – agreed on a case by case basis with HMRC.

Wrongful Trading

Remember there is currently a three-month suspension, from 1 March 2020, of the wrongful trading provisions effectively removing the threat of personal liability during the Covid-19 outbreak should your company ultimately fail.

If your company is experiencing financial problems, as a result of the Covid-19, please get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

The Government is doing everything it can to ensure that businesses and the self-employed receive the support they so desperately need in these troubled times.

Firstly, they are allowing the deferral of VAT for three months and Income Tax payments, due in July 2020 (under self-assessment), may be deferred until January 2021.

In addition, HMRC are increasing the size of its team, dealing with Time to Pay arrangements, allowing struggling businesses the additional time required to pay their corporation tax, PAYE and any VAT which is not covered by the above deferral. A dedicated Covid-19 helpline has been set up by HMRC and you may be able to agree a bespoke Time to Pay arrangement.

Time to Pay arrangements

Time to Pay arrangements have been around for several years and were initially designed to help primarily good businesses trade out of temporary cash flow problems, by allowing their tax liability to be paid over a longer period of time (usually 6 months or less) thereby providing the vital breathing space needed.

If an arrangement can be reached with HMRC it is essential that the terms are adhered to. If not, they could cancel in which case the whole debt will become immediately payable with the possibility of penalties being added too.

Applying to HMRC

In order to make a Time to Pay application you are usually required to submit a robust business case evidenced by profit and cash flow forecasts, detailing how and when the repayments will be met. Obviously, HMRC will want their money repaid over the shortest time possible but you do not want to over commit as default puts you in a precarious position and may lead to a statutory demand being issued against your business.

Whilst you can apply yourself, negotiations can be time consuming and difficult and you are often best contacting a professional such as an Insolvency Practitioner to negotiate for you.

If your company is experiencing financial problems, as a result of Covid-19, get in touch to discuss your current situation and the options available including Time to Pay arrangements. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

The Government are looking into the possibility of relaxing the Insolvency rules in the UK as a result of the coronavirus pandemic, according to Sky News.

One measure being considered is a 90-day freeze on winding-up petitions in view of cash flow and operational difficulties as a result of coronavirus (Covid-19). Other measures being considered are the suspension of wrongful trading rules and extending the existing 10 business day moratorium period in administration.

Current international changes

The Australian and German Government’s have already introduced changes and it seems likely that our Government will follow suit.

The Chancellor of the Exchequer also last week set out a package of measures to assist businesses through this period of disruption caused by Covid-19.

This includes a package of measures to support businesses including:

Furloughing staff and having their wages paid by the Government’s Coronavirus Jobs Retention Scheme.

Deferring VAT for 3 months and Income Tax payments due in July (under self-assessment) deferred until January 2021.

A 12-month business rates holiday for retail, hospitality, leisure and nursery businesses in England.

Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief.

Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a ratable value between £15,000 and £51,000.

The Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank for businesses with turnover of £45m or less.

A new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans.

The HMRC Time To Pay Scheme – agreed on a case by case basis with HMRC.

Additional emergency procedures to assist businesses

Whilst the Government may well be considering additional emergency procedures to assist businesses effected by Covid-19 there are inevitable delays with the current measures i.e. the Coronavirus Jobs Retention Scheme is yet to be launched. In the meantime, it is important to continue dialogue with your creditors and stakeholders to enable you to navigate your way through one of the most turbulent times in peacetime economic history.

If your company is experiencing financial problems, as a result of the Covid-19, get in touch to discuss your current situation and the options available. Our skilled and experienced team of Insolvency Practitioners will help you find a solution.

The world is a challenging place right now. With the Corona (covid-19) pandemic having a significant impact right across the globe, businesses across all sectors are finding themselves in a totally unprecedented scenario.

As we speak, the Government is trying to introduce measures to help save businesses and boost the economy during this turbulent time. Sadly, not all companies will make it through this testing time, in fact, many are already having to make redundancies and even close their doors.

But, if the worst does happen, what are your responsibilities as a director if your company becomes insolvent?

If your company becomes insolvent, in other words, you can’t pay your debts, you have certain responsibilities as a director. And it’s important that you meet these responsibilities to avoid any accusations of wrongful or unlawful trading, penalties or director disqualification further down the line.

Most importantly, you need to act responsibly to avoid any personal liability for the company’s debts.

Cease trading

As soon as you realise your company is insolvent, it is your responsibility as a director to stop trading. This means, you must stop sending out orders, issuing invoices, and paying your staff. You also mustn’t apply for any further finance.

Insolvency practitioners have a legal mandate to investigate your behaviour in the lead up to company liquidation. If they find evidence of wrongful trading, you could receive a disqualification order, preventing you from serving as a company director for up to 15 years. Worse still, if fraudulent trading is proven you could face more serious penalties, including fines and even a prison sentence.

Shareholder meetings

The next step is to call a meeting of all shareholders and a virtual meeting of creditors or a deemed consent procedure. If the liquidation of the company is voluntary, shareholders must vote for the company liquidation. At least 75% of shareholders must vote in favour.

Statement of Affairs

As Director, you will be required to prepare a Statement of Affairs in Insolvency. This acts as a handover document for your insolvency practitioner, ensuring they are fully aware of the business’ situation, including a list of employees, creditors, and suppliers, as well as debts.

Appoint an insolvency practitioner

At this point, you are legally required to appoint an insolvency practitioner.

Inform Companies House

Once the liquidation has been confirmed, the liquidator will need to inform Companies House using the official documentation. This will also need to be advertised in the official journal of public record, the Gazette, within 14 days.

Deliver all books, assets, and records to the liquidator

It will be your responsibility to deliver accurate, up-to-date records and books to the liquidator. These can be seized by force if you do not comply.

You may also be asked to attend an interview with the liquidator. If this is the case, you will be legally obliged to attend.

Directors’ Loan Accounts

If the company has an overdrawn director’s loan account, this will be classed as a company asset and will be called in by the liquidator.

Even if the directors’ loan has been written off, the liquidator can reverse the accounting entry to ensure that the directors are held liable.

It’s a worrying time for many businesses. But we’re here to help. If your company is experiencing financial problems as a result of the Corona pandemic, get in touch to discuss your current situation and the options available. Our skilled and experienced team will help you find a solution.